Revenue increased to £534m, up from £521m in 2015 with underlying revenue growth on a like-for-like basis at 6.6%. Profit before tax was down year on year to £72m (2014: £82m) while the average distributable profit per partner was down 13.75% at £344,000, from a high of £398,000 for the last financial year.  

The firm’s audit and tax lines of service turned in improved performances from the previous year with tax in particular showing a strong spike in growth. Tax revenue was up 7.6% to £104m (2014: £96m). The audit service line saw an increase of 4% to £148m (2014: £142m). Advisory was down marginally on the previous year to £282m (2014: £283m).

While revenue is not up as much as other firms this year, Grant Thornton has invested heavily in infrastructure and technology, which has dented profits but puts the firm in a strong position to meet client requirements going forward.

The investment is part of the strategic Vision 2020 plan, which has hit overall profitability at the firm, with partner profits down year on year. However, this is part of the five-year plan and is very much in line with expectations as the firm sees investment as a top priority.

Grant Thornton CEO Sacha Romanovich said: ‘We’ve been fortunate that we’ve had a number of years of strong growth so this has set us up to invest in fundamental programmes and processes so that we can deliver Vision 2020.’

Simon Jones, partner and member of the strategic leadership team at Grant Thornton, said: ‘There were reasons for the drop in profitability, firstly the individual voluntary agreement (IVA) practice came out of our business and it was difficult to replace this within one year, then there were some strategic decisions to divest of some businesses, including parts of the businesses based in Southampton and Northampton. We will still be operating in these markets and maintain teams there.

‘This was deliberate in terms of our strategic review and shaping the business moving forward. We identified a few parts of the business – there is always the danger that you hold onto businesses and let them wither instead of investing in them.’

‘These results are bang on what we projected in our plans for this year,’ he added.

Tax growth

A strong area of growth for the firm has been taxation services across the board, with a focus on providing multi-disciplinary tax support.

‘In terms of growth, take tax in particular, the biggest growth area has been in London and that is reflected across all areas of tax. It reflects where we’ve been working across all areas of tax,’ said Jones.

Romanovich said: ‘The direction in terms of travel for tax is that we are seeing tax in a much more holistic sense –for mergers and acquisitions it is tax structuring issues, secondly, helping clients manage their supply chains, and thirdly, developing tax assurance and supporting companies in making their tax strategy statements. That is a big deal, there are personal fines that can come back on CEOs and CFOs if there are any issues with these statements.’

A raft of new regulatory requirements is putting increasing pressure on companies, particularly in listed companies, and across the financial services sectors from tax strategy statements to the common reporting standard (CRS).

This is mirrored in the investment programme at the firm where there has been substantial investment in tax technology to support the increasingly demanding global tax reporting rules.

‘For a lot of clients it is all about helping them ensure that their underlying systems are robust enough to deal with the ever-changing regulations and compliance requirements,’ adds Romanovich.

‘Another area for strong growth is support for financial services – there are onerous requirements from legislation – we are adopting a cross-disciplinary approach.'

Brexit

As with most businesses, the Brexit issue is a concern for the firm due to the uncertainty created by the long negotiation process.

Romanovich said: ‘Certainly what we are noticing is that all businesses are doing checks and balances, looking at areas where they are a bit heavy in terms of economic threats. It is really those businesses that would be affected by a sudden economic downturn which are concerned. Hotel companies, for example, are reassessing their long-term investment plans.

‘Companies are looking at the best way to mitigate against the economic uncertainty and for many it is making sure that their international business is strong. We are looking at opportunities to expand overseas and are working closely with Grant Thornton firms in the US to develop support for financial services clients.’

Jones agreed: ‘The thing that business most hates is uncertainty. Businesses are finetuning but the negotiation process is not going to be a fast one, so they just need to ready to respond.’

Business transformation

The firm is continuing to build on its Vision 2020 strategy, along with continued investment in its programmes, processes and people.

The mid-tier firm has made some strategic changes to the business, rationalising the research and analytics capability to create more value for clients. Romanovich said: ‘Through strategic partnerships we have been able to bring together unique data sets to inform better decision making. A great example of this is our partnership with CIPFA which now provides CFOs with data about spend and place on a subscription basis.’

It has also strengthened its strategic accounts focus which has resulted in a 13% increase in activity with these clients as the firm develops capabilities to meet clients’ emerging strategic needs.

In terms of Grant Thornton’s innovation and enterprise teams, it has focused on developing the 'laboratory' and 'greenhouse' working strategy in a bid to develop and nurture new ideas to turn them into profitable revenue streams.

This has resulted in continued investment in a range of full service offerings for clients at different stages of their growth journey from Geniac, which supports start-up businesses, to G, a new offer to provide insights and coaching to accelerate early stage growth and Growth 365, a community of like-minded, fast growth entrepreneurs who start their journey with an indepth growth diagnostic to support them in furthering their growth ambitions.

On the audit front, the firm has responded to the introduction of the Financial Reporting Council’s new ethical standard with the appointment of a new leader of quality, ethics and excellence.

There has also been ongoing investment in the audit quality programme with a new global audit software and methodology system due to come on stream in 2017. This will streamline the audit process and make a much clearer link between the firm’s audit testing and International Auditing Standards, which will make it easier to evidence discussions and review.

‘We have also invested in our take on processes, centralising core aspects which also make our international conflict checking more efficient,’ added Romanovich.

People investment

In terms of people and in line with the Vision 2020 strategy, there is a continuing focus on shifting the emphasis to ownership across the complete staff base from partner level down.

‘This year has been one of much change - as we seek to create a real shift in ownership and responsibility. We have made big investments in people this year – appointing 30 new partners, 19 of whom are internal promotions. We have invested over £17m in new people, promotions and increases for our people, building capacity for continued growth,’ she added.

However, Romanovich admits that progress can be slow in terms of changing the dynamic of the firm from a traditional partnership to an employee. 'It is still early days for for the shared ownership model but you don't always realise how far you have progressed. We hosted a meeting with other shared ownership businesses recently and they were impressed by how much we had achieved in one year. I think that the thing for me is the impact of the changes - in the Glassdoor vote (for best diverse businesses to work for) we came in at number 12, ahead of Google on 13th and the nearest accountancy firm was in 24th place.

'There is a real sense of shared purpose around the firm about our vision of shaping a vibrant economy. There is still more work to do but we are seeing results across the business,' she added.

Retention levels are also high. ‘At the same time we have reduced our voluntary employee turnover to 18% - we have got better at keeping our most talented people within the firm. We have also relaunched our alumni network to reconnect with former colleagues.

‘We have also continued our commitment to building a more diverse team – particularly in the area of social diversity. We were a bold first mover in changing our entry requirements for new trainees. Two years on this has significantly impacted the makeup of our intake – over 21% would not have met our previous criteria – and this more diverse intake is performing well in role. We have had great external validation on our processes from The Bridge Group who have affirmed that our processes are among the least likely to disadvantage people of any they have seen.’